Question

Refer to problem 3-7. Suppose that hedge funds must withhold $300 million from the income of the manager and an additional 5% of the remaining income. Find the expected net income of a manager in this group. What property of expected values are you using?
x ($ millions) P(x)
$1,700 ...... 0.2
1,500 ...... 0.2
1,200 ...... 0.3
1,000 ...... 0.1
800 ...... 0.1
600 ...... 0.05
400 ...... 0.05